Feb. 12 (Bloomberg) -- Apple Inc. Chief Executive Officer
Tim Cook said the iPhone maker will “thoroughly consider” a
push by Greenlight Capital Inc.’s David Einhorn to use some of
its $137.1 billion in cash and securities for preferred stock.

Eighteen months after succeeding Steve Jobs as CEO, Cook is
facing pressure from shareholders, who have seen the stock slump
more than 30 percent since September amid slowing sales growth
and tighter competition from rivals such as Samsung Electronics
Co. Greenlight is suing Apple to block a proposal to eliminate
the board’s ability to issue preferred stock without shareholder
approval, a legal effort Cook called a “silly sideshow.”

“We welcome all ideas from all of our shareholders,
including Greenlight, and we’re going to seriously consider
it,” Cook said today at an investor conference in San Francisco
hosted by Goldman Sachs Group Inc. “The management team and the
board are in very active discussions.”

Einhorn is recommending that Apple issue $50 billion of
preferred stock, to be traded alongside common shares and funded
by operating cash flow. It would have a 4 percent annual cash
dividend, paid quarterly, he said in a letter to shareholders.
Preferred stock can have a higher yield and be issued without
diluting the value of common shares.

Greenlight’s Suit

Following Cook’s comments, Greenlight defended its lawsuit
and urged Apple to adjust its proxy plan that will go to a vote
at its annual shareholder meeting on Feb. 27.

“If Apple thinks the lawsuit is a waste of resources, it
could simply end the matter by complying with existing law and
filing a new proxy that unbundles the proposed changes to the
charter so that shareholders can express their views on each
matter separately,” Greenlight said in a statement.

Separately, Apple won the backing of shareholder advisory
firm Glass Lewis & Co. for its proposal that would bar the
company from issuing preferred shares without the consent of
investors.

“We would clearly go for a vote, whether our charter
requires it or not,” Cook said.

Apple, based in Cupertino, California, fell 2.5 percent to
$467.90 at the close in New York.

Slower Growth

The back-and-forth highlights investor concern as growth
slows for the iPhone, Apple’s biggest source of revenue and
profit, in a smartphone market that is becoming increasingly
saturated. At the same time, new products such as the iPad mini
-- priced to challenge tablets from Google Inc. and Amazon.com
Inc. -- are eroding profit margins.

“I was encouraged to hear that Cook thought the Einhorn
proposal was creative, even if that’s not what they ultimately
do,” said Josh Spencer, a fund manager at T. Rowe Price Group
Inc., which held 2.5 percent of Apple shares as of Sept. 30. “I
think they’re going to return a large amount of cash to
shareholders.”

Cook also discussed Apple’s acquisition strategy. Apple
will continue to buy about one company every two months, he
said. While Cook has looked at some companies for large deals,
none have passed muster, he said.

“Cash isn’t burning a hole in our pocket,” Cook said.
“We’re disciplined and thoughtful and we don’t feel a pressure
to go out and acquire revenue. We want to make great products.
If a large company could help us do that even better, we’d
consider it.”

IPhone Demand

Asked whether Apple might make a less-expensive iPhone to
appeal to budget-conscious customers and users in developing
countries, Cook pointed to price cuts for older models of the
iPhone and iPod. The iPhone 4 is available for free with a
wireless contract in the U.S., compared with a $199 starting
price for the iPhone 5.

The popularity of the iPhone 4 following a price reduction
last year caught Apple off guard, Cook said.

“We didn’t have enough supply of the iPhone 4,” he said.
“So it surprised us, as to the level of demand we had for it.”

Apple will enlarge 20 of its stores this year, and add 30
more retail outlets, including its first in Turkey, Cook said.
On average, each store is generating about $50 million in annual
sales.

Rewarding Shareholders

To bolster gross margins, the company could sell more
software and services, Cook said.

“We’re not a hardware company,” Cook said. “We have
other ways to make money and reward shareholders.”

One option could be a payments service linked to the more
than 500 million credit cards associated with users’ iTunes
accounts, Katy Huberty, an analyst at Morgan Stanley, wrote in a
research report.

Cook said he’s “never been more bullish” on the
innovative products in Apple’s pipeline.

“We are managing Apple for the long term,” Cook said. “I
know people worry about quarters. We care, but the product
decisions we make are for Apple’s long-term health, not for the
short 90-day clock.”